CDNS lowers profit rates on some savings certificates following market trend

KARACHI: The Central Directorate of National Savings (CDNS) has cut the rates of return on some of its deposit schemes, effective from Friday, following a decline in market interest rates and ahead of a central bank policy decision due on Monday.

The state-run savings institution, which offers a range of deposit schemes for individual savers, said it had reduced the profit rates on special savings certificates, defence saving certificate, short term savings certificates and regular income certificates.

The CDNS said it had reduced the rates of Special Savings Certificates (SSC) by 40 basis points to 16 percent from 16.4 percent previously.

The Defence Saving Certificates (DSC) will now offer a 14.22 percent return, down from 14.41 percent, while the Short Term Savings Certificates (STSC) will yield 20.34 percent, compared with 20.8 percent earlier.

The rate of Regular Income Certificates (RIC) has also been lowered by 12bps to 15 percent from 15.12 percent.

It also revised the rates on its Sarwa Islamic Term Account (SITA), which offers Shariah-compliant savings options. The profit rates on SITA for one-year, three-year and five-year maturities were changed by 283 to 66 basis points.

However, the rates of Bahbood Savings Certificates (BSC), Savings Account (SA) and Pensioners Benefit Account (PBA) remained unchanged at 16.08 percent, 16.4-17.4 percent and 16.08 percent, respectively.

The Central Direc­torate of National Savings has despatched revised rate sheets to all the regional offices with instructions that the existing stock of blank certificates would now be issued at new rates effective January 26 onward.

The CDNS slashed rate of returns on some of schemes by up to 160bps in last December also.

The NSS rates are linked with Pakistan Investment Bonds (PIB) for medium and long-term instruments and with T-bills for short-term securities. The revision was in line with the prevailing market scenario and the interest rate policy of the central bank.

The SBP has kept the policy rate unchanged at 22 percent since September, citing high inflation.

The move comes ahead of the Monetary Policy Committee (MPC) meeting of the State Bank of Pakistan (SBP), which is expected to announce its decision on the key interest rate on Monday.

The central is widely expected to hold its key rate at 22 percent for the fifth policy meeting in a row, though an expected easing of inflation could leave the door open for rate cuts in the future.

The decision is the last under a caretaker government before the country's general election next month.

It also comes in the midst of Pakistan's $3 billion Standby Arrangement (SBA) with the International Monetary Fund (IMF).

While the rescue programme has helped avert a sovereign debt default, some of its conditions have complicated efforts to curb inflation.

Nine out of 10 analysts polled by Reuters predicted the State Bank of Pakistan (SBP) would keep interest rates unchanged on Monday, with one analyst predicting a 50 basis point (bps) cut.

Analysts see some respite could be seen later this year if inflation continues to ease as expected.

Pakistan's annual inflation rate rose slightly to 29.7 percent in December from 29.29 percent in November, mainly driven by higher food and energy prices. On a monthly basis, inflation increased by 0.8 percent in December.